Now, American lawyer Dan Harris says at least one Chinese company is attempting a new way to beat Beijing’s tightening regime of capital controls: by faking a breach-of-contract lawsuit with an offshore entity which the Chinese company intends to “lose.”

China limits its residents to sending overseas $50,000 a year, except for a few extenuating circumstances including business-related payments. As a weakening economy and pressure on the Chinese yuan trigger a cascade of capital racing out of the country, Beijing has intensified regulatory scrutiny of all funds trying to leave. An executive with the Bank of China Ltd. told China Real Time last month that the heightened supervision involved all bank branch managers being summoned for official training workshops to emphasize the urgency of such checks.

But China’s experience has often proved that money will find a way to flow where it wants. In a post published on Sunday on Seattle-headquartered law firm Harris & Moure’s China Law Blog, Mr. Harris detailed his conversation with an adviser to a Chinese company. The adviser had called him essentially to ask Harris & Moure to help the Chinese company deliberately lose a lawsuit for a phony breach of contract that would result in a payout of $3.5 million, which the Chinese company would then send to the U.S.

The money, as it turns out, would be paid to entities in the U.S. controlled by the Chinese company itself.

Mr. Harris told China Real Time that the company, a privately-held Chinese manufacturer, wanted to pursue such a fake arbitration, rather than fake a simple legal settlement for the same amount of money, because it was concerned about convincing government regulators who have been closely scrutinizing offshore remittances.

“They wanted it to look really official,” he said in a phone interview. “Arbitration also moves quickly, so they could conceivably do it within three months.”

Mr. Harris said he got the call in the last two weeks, and it was the first and only of its kind he’s so far received. He said he altered the nationality of the adviser recounted in his blog post – the adviser was a Westerner, but not Australian – to shield the identities of those involved.

It became clear to Mr. Harris in his conversation with the Western adviser to the Chinese company that there wasn’t even a real counter-party in the U.S., where the Chinese company wanted to move its funds. “We would have helped to form this company that would have sued this Chinese company,” he told China Real Time.

Mr. Harris has expertise in doing business in China. He founded Harris & Moure, which has offices in Beijing, Qingdao, Portland, Las Vegas and Chicago.

Mr. Harris said he declined the adviser’s proposition, given that it’s unethical. It isn’t clear so far if the method has so far caught fire among Chinese companies, as it would involve having to convince or hoodwink foreign attorneys. Anecdotal feedback to Mr. Harris suggests only one other instance of a similar pitch that he’s heard of.

But the calls from companies seeking more traditional methods of capital outflow out of China keep coming. Chinese real-estate companies still call his firm asking for ideas on how to get money out of China, Mr. Harris said.

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